Consultant cuts growth outlook for electric cars

Economy Minister Philipp Roesler poses in a electric car after taking over the economy ministry from his predecessor in Berlin May 16, 2011.

Reuters/Thomas Peter

DETROIT Electric cars might make up 5 percent or less of the U.S. auto market by 2020, a consulting group said on Tuesday, cutting its prior estimate at a time when automakers are racing to develop such vehicles.

Improvements in internal combustion engines and a more modest forecast for oil prices prompted Boston Consulting Group to tweak its estimates from three years ago in its upcoming report titled "Powering Autos to 2020."

"The surge in oil price in 2008 had pushed everybody to work much harder on improvements," Xavier Mosquet, the global head of the group's autos practice, told reporters. "The good news is the ICE (internal combustion engine) improvements come at a lower cost than expected three years ago."

Boston Consulting changed the way it defines electric vehicles in its 2011 report to include purely battery-powered vehicles, plug-in hybrids and range-extended vehicles, a definition that would include General Motors Co's Chevrolet Volt and Nissan Motor Co Ltd's Leaf, but not the original Toyota Motor Corp Prius or Honda Motor Co Ltd Insight.

Since 2009, the group has widened its definition of electric vehicles to include plug-in hybrids. Excluding those, it looks for electric vehicles to make up 3 percent of new vehicle sales in the United States, the world's No. 2 auto market behind China, by 2020. That is down form a 2009 forecast of 5 percent for the same class of vehicles.

If oil prices hover around $130 per barrel -- well above the current level of around $100, but shy of the record high near $150 in 2008 -- BCG forecasts electric vehicles will make up 2 percent of the North American market by 2020. If oil prices hit $180 per barrel, BCG sees these vehicles making up 5 percent of the North American market.

In its previous forecast, the group had presumed oil prices of $150 per barrel. Higher oil prices make electric vehicles more cost competitive with their gasoline-powered counterparts.

Globally, electric vehicles are expected to make up between 6 percent and 8 percent of new vehicle sales in 2020 at the lower forecast for oil prices. If oil jumps to $180 per barrel, EVs could make up 12 percent of European new auto sales and 9 percent in China, BCG said.

PUSHING EFFICIENCY

Fuel efficiency and emissions standards are expected to grow stricter over the next decade, which has pushed automakers to experiment with smaller engines and design changes.

Direct injection, turbo-charging and electric power steering are among the improvements in combustion engine that BCG expects to be mainstream in passenger cars worldwide.

Those changes can cut emissions of carbon dioxide, a greenhouse gas that contributes to global warming, by as much as 40 percent, BCG said. For every percentage point cut, consumers will have to pay between $50 and $60 more for the car -- about half the group's estimate of $100 three years ago.

"It's only $2,000 to get 40 percent improvement with ICE technology," Mosquet said. In 2009, "what we saw was the $3,000-$4,000 range, which obviously makes it more difficult for consumers. It's achievable and it's cheaper than expected."

GM's Volt and the Nissan Leaf are two of the first electric vehicles to be offered to mainstream consumers. Other automakers, however, are also preparing electric vehicles.

Ford Motor Co is planning its first all-electric passenger car, the Focus Electric, for late 2011 and Toyota is planning a RAV4 Ev for the 2012 model year. Chrysler Group LLC plans to introduce an electric version of the Fiat 500 next year.

But this market has its hazards, as evinced by GM's recent decision to cancel its Cadillac SRX plug-in hybrid program because it was expected to be a money-losing venture.

"If I'm one among many, it's a nightmare," Mosquet said. "If you're the fourth or the fifth in the series, really you spend a lot of money and you don't get anything."